Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
31 Cards in this Set
- Front
- Back
|
definition of monopoly
2 ex's granted by government through ___ or ____ gained through ____ or large _____ |
one seller for entire market
patent drugs, rural hospitals patents or licenses innovation or large economies of scale |
|
|
Perfect competition.. does any firm have power to raise price at all? why not? what is slope of market demand and firm's demand (on s/d curve)?
|
No. Because competition would take the business.
Slope of market demnad is down, but firm's demand is horizontal line. |
|
|
so monoply firms have pricing power.. they want to choose what price?
|
whatever maximizes profit
|
|
|
marginal revenue = ___ (definition)
in competitive market, MR = ____ competitive firm set MR = P = __ TO CHOSE Q revenue = |
additional revenue from marginal unit
P MC P x Q (SQUARE ON GRAPH IF D = STRAIGHT LINE) |
|
|
explain MR for monopolist with graph (rectangles)
|
demand line. R1 = P1Q1 (rectangle), R2 = P2Q2, MR = R2-R1. Q2-Q1 = 1
|
|
|
What dose MR curve look like next to D line?
|
straight line with steeper slope than D. becomes negative halfway down D line, showing the place where lost revenue from price cut exceeds benefit gained by increased sales
|
|
|
How does Monopolist set price?
|
Put MC over the MR an D graph. Don't sell if MC > MR, sell more if MR > MC. Set Q where MC = MR. Find P that corresponds to Q on D CURVE.
|
|
|
Monopolist ___ output compared to competitive EQ
resources are underallocated for monopolist bc MB = ___- |
restricts
PM > MC |
|
|
What are the monopoly effects on welfare?
|
Monoplhy price leads to higher Producer surplus, lower consumer surplus. Lower overall welfare.
DWL because some units with MB>MC not produced |
|
|
T/F: Natural monopolies often regultaed (ex?)
T/F: hospitals and insurers are local monopolies sometimes. what is market power? |
T. utilities, railroads
T firm hhaving ability to ste prices, dosen't have to be only seller |
|
|
T/F: hospitals joining together increases prices without raising quality.
what is AHIP? |
T
america's health insurance palns |
|
|
monopolists charge different prices by type of consumer sometimes.. what does this lok like on graph? leads to ___ PS and ___ CS. Produciton more/less restricted?
|
demand curve... differnet prices correspodning to different quantities. More PS and Less PS. Less restricted
|
|
|
Competition means production is economically efficient because MB = _____.
|
MC
|
|
|
2 demand and 2 supply assumptions
|
demand: Consumer is best judge of own welfare. Has complete information and can predict outcomes of consumption
Supply: Supply and Demand are independently determined. Firms have no market power. |
|
|
which demand failure does asymmetric information reltae to
|
that consumers choose hwat's best for them. don't necessarily know about disease enough to choose provider/treatment/plan that's best for them
|
|
|
how does shopping for gas differ from chest pain treatment in terms of 4 factors?
|
price uknown to custeomer
quality is hard to measure (instead of predictable) transaction is infrequent consumer in crisis intense competition for gas |
|
|
Does pricing info for medical services increase patient shopping? (who studied?)
Does quality info? Benefits of treatment? Why? |
No. Hibbard and Week. No effect on behavior.
Not really. Don't understand measures of LDL etc. Only patient feedback measures. Counterfactual (would I have gotten better with a different provider)?) why? b/c consumers don't always act in rational ways, and also overwhelmed with information. |
|
|
Demand failure 2 - insurance and mora hazard
define moral hazard in health economics. what study investigated. results. effect on health? why? |
moral hazard = tendency of people to spend more when cot shared with others.
RAND health insurance experiment - 5800 people - treatment was various OOP costs, outcomes utilization and health measures. Coinsurance rates 0, 25,50, 90%, high coinsurance compenstaed iwth higher income. Higher coinsurance went with less utilization, including ineffective services. REDUCED FREQUENCY, NOT SPENDING WITHIN EPISODE. no effect on health.. maybe time lag, maybe less unnecessary care, maybe b/c healthy population |
|
|
2 factors affecting generailzability of RAND study
what is more recent expierment ? |
higher attrition in high cost sharing groups, medical care different now, maybe wuold see more of a health impact now.
|
|
|
2 intiiatives to deal with moral hazard in terms of insurance plans. enrollment high or low? employer owns which one?
|
health savings accounts (worker owns account, high deductible plan)
consumer-directed health plan (employer owns account) |
|
|
how is consumer/physician a principoal agent problem?
|
consumer is principal, physician is agent. consumer hires physician to give him info. expects to act in best interest, but physician may go according to his intersets as well. information is asymeetric.
|
|
|
how does supplier-induced demand show up on S/D curve?
Areas with high physician/population ratios tend to have __ volume of services and ___ prices |
increase supply should increase quantiy, decrease cost. if physicians inducing demand, pirce may not decrease.
higher. higher. consistent with induced demand |
|
|
what are 2 altenrative explanations for why high physicain/pop ratios etc?
|
docs may move to more expensive areas because attractive (thus causing high P as well)
quality could be better in high-cost areas (missing from regression models, high P b/c quality high) |
|
|
How to test SID using payment rates?
what are objections to this? |
competition: P down, Q down (supply)
most studies find P down, Q up, consistnet with SID. objections: P down usually maens copay down, so Q up could be price response. Also doc's supply curve could be backward bending, where they're not working as much when prices are very high, so an increase is seen when prices go down. |
|
|
how to test SID using income targets? results?
|
ask docs how much money they want to earn/how many patients they want and compare to what they're currently earning, and see if gap correlates to behavior..
larger gaps associated with higher prices and volumse (which is consistent with SID) |
|
|
POLICY RESPONSES TO SID: WHAT DOESN'T WORK? HAE TO DO WHAT? 3 POINTS UNDER THAT
|
DOESN'T WORK: COPAYS ,DEDUCTIBLES, CDHPS
have to reduce PROVIDERS INCENTIVE TO PEROFRM UNNECESSARY S3ERVICE >PAYMENT REFROMS >PRACTICE GUIDELINSE >MANAGED CARE AND SELECTIVE CONTRACTING |
|
|
payment reforms = wbhat??? two possibilities. dangers of first one??
|
1. fee-fore service switch to prospective payments (DRGs, capitation)
-risk of upcoding and skimping pay for performance (mix of fee for service and bnouses for performance measures) |
|
|
PRACTICE GUIDELINES USE AND CON
|
TRYING TO CUT DOWN ON UNNECESSARY CARE AND BRING ATTENTION TO DISEASES THAT NEED MORE ATTENTION.
WRITING CAN BE CONTENTINOUS |
|
|
managed care and selective contracting advantages
|
PCP refers to specialists, case managers plan inpatient discharges, AVOIDS HIGH-0UTILIZATION PROVIDERS. MCOS USE NETWORKS WITH GATEKEEPERS AND PROSPECTIVE PAYMENTS (PPOS)
|
|
|
POOLICY EFFECTIVENESS
___ REDUCED LENGTH OF STAY _____ REDUCE ADMISSIONS ___ EVIDENCE IS MIXED QUALITY OF MCO CARE = ____ |
drgs reduce lenght of stay
capitation, MCOs reduce admissions evidence mixed for fee 4 performance and guidelinse quality of MCO mixed (favorable selection problem) MCO backlash any provider laws |
|
|
what is second failure of supply assumption? who polices?
|
market power isn't present - can raise P without losing entire market.
MERGERS BETWEEN HOSPITALS OR INSURERS TO BOOST MARKET POWER. DEPARTMENT OF JUSTICE AND FEDERAL TRADE COMMISSION police anti-competitiv emergers |
